A blog about Non-profit Organization Management & Leadership

Main menu

Category Archives: Development

An overlooked concept in the world of non-profit organization financial management that does not appear to have hit its full stride yet is that of fiscal sponsorship. In a prolonged and challenging economic downturn, it may be a good time to look at it more closely. Prompted by the increase in the number of non-profit organizations seeking IRS tax exempt status (e.g., following the widespread devastation of Hurricanes Sandy and Katrina), fiscal sponsorship refers to the use of existing, established organizations to achieve similar or overlapping missions rather than forming new organizations. Essentially, a ‘fiscal sponsor’ is a non-profit, tax exempt entity that acts as a financial sponsor for a project, committee or another organization that may not yet have received its tax exempt status with the IRS. In recent years, fiscal sponsorship has become more widely known in areas of human services, environmental causes and artistic endeavors.

Perhaps ideal for start-up organizations or those that want to accomplish time-limited charitable projects, the fiscal sponsorship of a larger, established organization can provide often costly administrative “overhead” functions such as office space, payroll, employee benefits, fundraising, publicity, legal counsel and training assistance. Some project developers may simply want to test their ideas out in their fields of interest before taking on the task of applying for tax exempt status with the IRS. There are many kinds of sponsorships; however, chief among them is grant-seeking sponsorship largely because foundations and government agencies [always] fund organizations and disallow making grants to individuals. In effect, the fiscal sponsor organization may receive grants and donations and even engage in other fundraising activities on behalf of the project, manage those funds according to their intended uses as well as document the progress of the project. Choosing a fiscal sponsor largely depends on the nature or purpose of the project or committee and how consistent it may be with the mission of the larger organization. In addition, choosing a fiscal sponsor also needs to take into account the reputation of the larger organization in the community, its own financial health as well as its relationship with its funding sources. In other words, how attractive will the proposed sponsor organization be to potential funding sources for the project in subsequent grant requests? Aside from the local community, many national organizations have sprung up expressly for the purpose of providing fiscal sponsorships; for example, Tides in San Francisco, and many directories are available online. Moreover, the opportunities for a social cause or project to attract more attention and increased funding is somewhat greater in a fiscal sponsorship through the “cross promotional” benefits of an association with the larger, established organization. According to Gregory Colvin – a leading tax law expert in fiscal sponsorship – additional models of sponsorship include direct project sponsorship, independent contractor support, group exemption and technical assistance. For more detailed information about each of these models of fiscal sponsorship, please see Mr. Colvin’s book, Fiscal Sponsorship: Six Ways To Do It Right (Study Center Press, 2006).

Like many management decisions, entering into a fiscal sponsorship relationship is not a casual decision and does not come without some potential pitfalls for both the non-profit and the proposed project. A fiscal sponsorship arrangement needs to be formalized in a written contractual agreement or memorandum of understanding between both parties, typically specifying who will be responsible to do what and when. A memorandum of understanding – which, it is recommended, be reviewed by a tax attorney first – clearly addresses the terms and conditions of the project management, including the scope of the project, timeframes and deadlines, employment issues if necessary and the authority of the project, to name a few. Perhaps one of the biggest concerns for an established non-profit organization is that it will assume all of the legal liabilities, tax requirements and regulatory compliance of the project in a fiscal sponsorship agreement. Conversely, on the side of the project or committee seeking fiscal sponsorship, there may be a perceived lack of independence in the project when it is administratively managed by others. Additionally, that established non-profit organization is not going to give away their administrative time for nothing. The sponsoring organization can and most likely will charge administrative fees, which in itself need not be a bust for the project because the administration fees can be built directly and transparently into the budgets of grant requests.

Clearly, the choice of a social cause or project to seek fiscal sponsorship from a larger, established non-profit organization is a highly individualized and case-specific one. While some organizations and projects may view this kind of relationship as cumbersome or intrusive, others may thrive on it or choose to continue indefinitely in a sponsorship mode. Still other projects may receive enough valuable insight and guidance to launch their own non-profit organizations.

With the universal season of giving upon us, it is the perfect time for the non-profit community to give appropriate thanks to their donors and volunteers. These are some of the strategies that I have learned about acknowledging donors and volunteers over the years:

Report the news! By and large, donors appreciate hearing news about organizations that they support. Or, at the very least, they like to hear about the activities of a non-profit; for example, our child care program went on a field trip to a museum last week. More important, donors like to understand the results or outcomes of their contributions; for example, the organization served 1,500 homeless individuals with hot meals last month.

Be timely! There is nothing worse than sending the acknowledgement of a gift six months later – and after the donor may also have forgotten it! This can only serve to remind the donor not to donate again. Prompt and efficient responses to all gifts is a simple way to increase the likelihood of long associations with donors.

Treat all gifts with gratitude and respect – no matter the size of the gift. Whether a donor gives $5, $500 or $50,000, all gifts need to be acknowledged appropriately. According to Kivi Leroux Miller of the Nonprofit Marketing Guide, 65 percent of first time donors do not make a second gift. Ms. Miller explains that donors want a simple, prompt and a meaningful thank you letter with some communication about how the donation was used.

Volunteers are donors, too! In many non-profit organizations, volunteers often perform critical and invaluable functions. At an average national “value” of $22.14 per hour, a volunteer who frequently gives freely of their time, talent and energy can quickly add up to the equivalent of a salary that an organization is not paying. Volunteers need to be thanked and acknowledged at every opportunity we have.

Hand-write notes. Despite the era of technological sophistication, people still like to receive hand-written notes! Rather than the officious form letter, hand-written note cards demonstrate personalization and the value of a relationship with a donor or volunteer. I have even hand-written the first names of donors and wrote personal notes in the margins of the officious form letter! This is especially true for donors or volunteers with whom we have personal and social relationships.

Put their names in writing. In general,people also liketo see their names in writing, which can also help them feel that their contribution is valued by the organization. Whether it is in a printed newsletter, on the organization’s website and/or on lists of particular levels of giving, donors do tend to check that their names have been listed in writing! However, discretion should be exercised in “publicly” listing the amount of a donation. That is, public acknowledgement is typically understood at the time of soliciting the gift – e.g., the ‘president’s circle’ of $10,000 and above donations will be included in the annual report. Of course, if a donation is designated as ‘anonymous’ upon receipt, the donor does not want to be publicly acknowledged and that needs to be respected.

Plan a special event. Finally, another method of acknowledging volunteers and donors is to hold a special event around them or a holiday in order to thank and recognize them. Popular in volunteer management, some organizations use the concept of a volunteer luncheon; for example, to thank and recognize the people who help them every day. The same idea can be utilized with donors (and potential donors) and can include a tour of the organization or its facilities. A special event for this purpose need not be elaborate and can be as simple as a meet and greet, light refreshments or a social mixer. While having a breakfast or lunch does have costs associated with it, many businesses in the community are willing to make in-kind donations to a non-profit in order to help them thank their volunteers (and it’s good advertisement for their businesses!).

The proliferation of non-profit organizations across the United States has been well documented for years. According to the National Center for Charitable Statistics at the Urban Institute, in the ten-year period from 1999 to 2009, the U.S. saw a 31.5 percent increase in the number of registered 501(c)3 public charities, totaling more than 1.5 million nationwide (2010). That percentage increase excludes foreign and government organizations. In my state of Pennsylvania alone, Non-Profit Stats reports a whopping 72,725 registered charitable organizations (2013).

The numbers are even more significant today because many non-profit organizations in communities throughout the country are often trying to carve out their existence in fierce competition with one another for stagnant pools of local monies as well as they are facing reduced if not eliminated private and public funding in a poor economy.

My recent introduction to a very worthwhile start-up non-profit in the Lehigh Valley, PA community reminded me of the rigors of starting a new non-profit organization. The following are just a few highlights of the many, many “hoops” through which a fledgling non-profit is required to jump:

Determine the need and sustainability. Before hanging a sign on the door and printing business cards, determine the need for a non-profit serving the proposed mission or purpose in the community. Are there other organizations already established in the local community that serve the same purpose, goals, population or issues? If so, there may not be a strong commitment to a “duplicate” organization starting up. More important, determine the sustainability of the proposed non-profit among the community. Who will fund it? Is there enough interest and money in the community to support the organization on an ongoing basis? Research corporate and government funding opportunities that are good matches with the mission of the organization and visit with local, private foundations in order to introduce the idea of a start-up non-profit, gauge their interest, and get to know them.

Determine the type of tax exempt status needed. Perhaps the most widely known, the 501(c)3 non-profit is an IRS tax code that permits certain tax exemptions to charitable, educational, scientific, religious, etc. organizations. Other tax exempt codes have been established for civic leagues, child care and social welfare organizations; for example, that have varying disclosure requirements and contribution allowances. Currently, I count 34 different IRS tax exempt codes!

Establish by-laws. The by-laws of a non-profit define how the organization will function and conduct its business in the community and typically address issues like board governance, terms of service and lines of authority within the organization. Consultation with legal counsel – or at least review of the by-laws – is highly recommended at this stage of the process.

Select a board of directors. What does this particular non-profit need in terms of the community representation on the board of directors? In general, organizations usually need financial, legal and human resource experience. Additionally, people tend to gravitate to what they know best so it is typical; for example, to see organizations with an educational purpose with teachers and school district administrators on the board. Make it a goal to diversify the board of directors as much as possible. While there is obvious value in keeping similar people together, diversification in the board increases the richness of experience and expertise that a board of directors can provide to a non-profit.

Develop strategic and fundraising goals. The management and board of start-up non-profit organizations are strongly encouraged to engage in some level of strategic and fundraising planning. How will the organization be funded? Where do management and board members expect the organization to be financially and programmatically in a year? In three years? In five years? A strategic plan is even more important to start-up non-profits especially because in the absence of a proven, successful track record of results it is one of the key items to be shared with potential funders to demonstrate that the organization has been formed with forethought, expertise and a business plan.

Request tax exempt status from the IRS. This is really the “big kahuna” in forming a non-profit organization. An organization is not considered not-for-profit until the IRS deems it so with a “Letter of Determination” (see bullet above about types of tax exemption). Without it, an organization may not legitimately solicit funds as a non-profit and donors can not make tax deductible contributions.

File state articles of incorporation. Typically granted from a Department of State, incorporation refers to the absorption of state law under the specific protections of the U.S. Constitution. That is, the U.S. Constitution shall override all state constitutions and state laws. For organizations that plan to incorporate, this is a key step that may occur in conjunction with filing for tax exempt status with the IRS.

Establish record keeping and financial accounting systems. Establishing board approved, financial and internal management procedures and protocols early in the game; for example, financial statements and reports as well as board meeting minutes, is advisable. Who will be responsible for maintaining records and financial accounting?

Obtain liability insurance. Like any other business, non-profit organizations are susceptible to legal risks and start-up organizations are advised to obtain liability insurances. Again, consultation with an attorney familiar with non-profit organizations can be very valuable in selecting Directors’ and Officers’ liability insurance as well as general professional liability coverage.

The bulleted items above are only some of the issues that need to be addressed by a start-up non-profit organization. Depending on the organization, additional items that may need to be addressed at start-up include: personnel policies, unemployment compensation, withholding taxes for the IRS, filing for state sales tax exemption status, and registering with state Bureaus of Charitable Organizations.

References

The National Center for Charitable Statistics at The Urban Institute; Quick Facts About Nonprofits, Custom Report Builder (2013). Retrieved from:

I have always said there is more to being the boss than being bossy. A lot more. I think there is a tendency for us to confuse – and it is easy to do – the ideology of leadership with the act of supervision. Clearly, many situations and tasks need supervision; however, leadership is a bigger, broader picture than telling someone when and how to do something. Consequently, there are great supervisors who would not necessarily make great leaders and vice versa. Leadership comes in different sizes, shapes, colors, styles and gender – and at times from the most unlikely of places. Leadership styles aside – and there is an abundance of self-surveys available on-line and in any bookstore to help us figure out which particular brand each of us subscribes to – the following are several ideas for consideration about leadership:

Leaders have passion and vision.A leader not only has passion and dedication to the mission of the organization but also a vision for the organization beyond what is happening today or this week. He or she has a vision of how the organization’s mission will be played out in the next year as well as five years from now and uses many resources to guide the organization toward that vision.

Leaders focus on relationships. Leaders appear to know everyone because they understand the inherent value of relationships – both within the organization and in the community at-large. Good leaders do not readily “burn bridges” and they are skilled at networking and maintaining relationships even in the face of adversary.

Leaders listen. Leaders also understand the art of listening to the other people around them (community stakeholders, staff, board members, partner organizations). Rather than frequently arguing their own agenda, leaders are more intent on listening to others in order to determine from whom their strongest support is coming in order to guide the organization toward the vision.

Leaders maintain poise and grace under pressure. A leader maintains positive energy even during trying circumstances. Contrary to the boss who seems to think that yelling, tantrums and blame are the only ways in which to get something done, a leader maintains personal dignity as well as that of the organization and rarely displays a disorderly response. While ‘Fear Factor’ may make good television drama, it certainly has no place or benefit in non-profit management. Perpetual negative responses (or interactions) tend to diminish others’ confidence in one’s ability to lead.

Leadership develops leadership. Conversely, a leader bears the self-confidence in his or her own leadership such that other staff in the organization are encouraged to develop professionally. Leaders are comfortable in their roles. He or she not only supports and welcomes professional development but is also wise to consider his or her own succession at some point.

Leaders accept change. All of us have most likely experienced difficulty with change at some point in our lives. On the other hand, change is necessary and good. Leaders not only accept change, they often flourish with it, making change work for them and their organizations. Moreover, leaders effect change in order to guide the organization toward the vision for it.

Leaders lead.Plain and simple: Supervisors supervise and leaders lead. Finally, a leader who transgresses into others’ roles within the organization is not likely to be as effective and efficient in facilitating the bigger picture development of the organization as one who clearly communicates vision and goals for the organization. Leaders understand the hierarchy of the organization and how best to navigate it.

Yes, I know that I am using Facebook as a verb in the title. It’s at that level. The social medias have made an often incomprehensible imprint on our culture as a people such that it is difficult to remember what we did before their genesis. According to Huffington Post Tech blogger, Brian Honigman, Facebook’s active monthly users now total nearly 850 million people as well as 250 million photos are uploaded everyday (source: Jeff Bullas). That’s a lot of people with a lot of pictures! One more fun fact: As of 2012, 210,000years of music have been played on Facebook (source: Gizmodo). Now that is very compelling about its size and scope!

Along with the proliferation of social media sites on the world wide web (Facebook, Twitter, LinkedIn, Instagram, Pintrest, Google+, YouTube, etc.), so too have there been a plethora of writings, lectures and webinars (ad nauseam) on their fundraising uses by and potential impact on the non-profit community. In addition to the social media giants like Facebook and Twitter, the advent of sites like Google+ and YouTube have made it easier than ever to promote non-profit organizations with photos and video of events and activities. Social media is a wonderful invention and can be an excellent accompaniment to a non-profit organization’s marketing or development plan but it plays a very prescribed role in the activity of fundraising.

A discussion about the role of social media in non-profits needs to be prefaced by a key concept. A non-profit organization’s website is the foundation of its on-line presence.In other words,the organization’s website is like its on-line “home-base” of operation, including a place at which visitors and supporters are able to make secure on-line donations. The website serves as a reflection of the organization’s mission in the community and communicates it’s values and philosophies to all who visit it. Sounds beautiful, right? But perhaps the single biggest problem for organizations and their websites is maintaining them. The organization’s website needs to be as current and timely as possible at all times. There is nothing worse than going to a non-profit’s website, clicking on the ‘News’ tab and finding that the latest news is from 2010. Thud! Did nothing happen since then? When potential donors – both seasoned and newcomers – feel that they are not being actively engaged in the current events of the organization by visiting the website, they may move on to other organizations that do. Typically, the management of a non-profit’s website may be a task of the development director or department; however, smaller organizations that do not have the luxury of a development staff are encouraged to select a point person within the organization to perform maintenance and update tasks on the web site on a routine basis.

The value in non-profits utilizing the power of social media to raise funds is not in all the millions they will rake in simply from being on Facebook or Twitter. Rather, the value of social media in non-profit is to bring donors to the organization’s website. That is where the real “business” of the organization happens and why it is so important that it is functional and current. The real “job” of social media like Facebook or Twitter in a non-profit organization is to generate interest in the organization and the mission, prompting the potential donor to think, “I’d really like to get involved there” or “I’d like to contribute” and subsequently leading them back to the website where they can make a contribution or volunteer. Social media can be used to inform or teach lay visitors about the mission of the organization, often in creative ways. I saw one organization place a quiz about homelessness on their Facebook page in order that visitors can test their own knowledge of the social problem. Social media can be used to highlight the organization’s partnerships with businesses and other organizations in addition to thanking them publicly. Moreover, the social medias are fun and they can and should be used to create excitementor anticipation about the organization’s activities or events – and again, take donors back to the website when they have “bought” the idea on Facebook or Twitter. If an organization holds an annual fundraising golf tournament; for example, Facebook and Twitter are very good social media to not only raise awareness of the event but also to increase the excitement and anticipation for it with strategically timed posts and tweets – and with the added result of possibly bringing more people on board!

Similar to the organization’s website, a non-profit’s social media sites need to be just as well maintained. Once a social media page or account has been established, it does a non-profit little good if it just lies out there in cyberspace. It looks like nothing happens at the organization and in some ways that can be fatal. I have followed several local non-profits on Twitter; for example, but quite honestly, I’ve lost interest in them because they never put any tweets out. They are not telling us anything about their organizations and thereby letting their presence be known by not communicating often enough. Finally, a non-profit organization’s social media is likely going to be as effective as the organization itself. The bottom line is that there needs to be substance behind the posts or tweets. In other words, when an organization is merely taking up (cyber) space just for the sake of being there and there is no real “meat” in the posts or tweets, it tends to come through. If a non-profit organization is struggling – for whatever reasons – it may be best to focus all of the organization’s resources and energy on resolving those issues before moving forward with a social media marketing plan.

There is a phrase in fundraising circles that says it could more aptly be called “friend-raising” and that could not be more true than in the case of planned giving. At a time when any source of non-profit revenue – grants, contracted services or even entrepreneurship – can be tenuous at best, the concept of planned giving makes even more sense. Most development professionals would concur, the most stable and steadfast source of revenue in a non-profit organization is not the corporations, businesses or foundations – it is individual donors.

In today’s economy it behooves charitable non-profit organizations – whether they are small and local or large and nationwide – to develop some kind of planned giving program. According to David C. Hall of the University of Arkansas in an article published in The Non-Profit Times (May, 2013), if you are not asking your donors for planned gifts, someone else is. The literature in the field abounds with ideas about converting annual fund donors into planned givers. In another article, Andrea Wasserman, president of Social Profit Ventures in Washington D.C., makes the analogy of a “donor funnel”, along which a donor moves from being an annual giver to making planned gifts. According to Wasserman, one of our goals in development is to bring donors into the organization at the point of annual giving and move them along the funnel toward major gifts. Do not allow donors to get stuck at the annual giving level; identify and cultivate donors for larger and planned gifts (The Non-Profit Times, August 20, 2013). Moreover, according to Mr. Hall, organizations that utilize planned giving strategies can earn 50 to 100 percent more than those who do not and a typical planned gift is 200 to 300 times the gift of a donor’s largest annual gift. Additionally, donors who make gifts in their wills typically increase their annual support (The Non-Profit Times, May 29, 2013).

Moving beyond the traditional bequeathed gift provided by a donor’s will, there are now many ways in which a potential donor can make a planned gift to an organization that a creative financial advisor can discuss. By definition, planned gifts typically are not part of the donor’s discretionary income and are major gifts made possible by estate and tax planning strategies to maximize their gifts to charitable organizations. For example, potential donors can use appreciated life insurance, a retirement plan, real estate, stock – and even art work to make major gifts. According to Planned Giving.Com, the three types of planned gifts include: 1) gifts that use appreciated assets in lieu of cash, 2) gifts that return income or other financial benefits to the donor such as Charitable Gift Annuities, and 3) gifts payable upon the donors death. According to Mr. Hall, many potential donors are willing if not eager to make a planned gift but they simply do not know how (The Non-Profit Times, May 29, 2013).

As well, planned giving programs require just what its name says – planning. A bit more involved than organizing a Saturday morning bake sale outside of the WalMart, planned giving requires the strategic cultivation of long-term relationships with donors. One might start by looking at their donor and mail lists and identifying who gives regularly or every time a request is made and who attends all of the events and activities of the organization. In other words, identify who the organization’s most loyal followers are. These are the folks we need to work toward moving along the funnel. Usually, it is not the first-time $50 donation that we seek for planned giving. Also, planned giving programs demand appropriate stewardship, typically in the form of a committee that may include staff as well as the Board of Directors. Moreover, a planned giving program needs to be well represented by a Board of Directors, not only in their stewardship but by their participation in it as well. If a Board of Directors is not invested in the organization at that level, why should I be? Finally, Mr. Hall also suggests that communication with planned givers needs to be high and in an uncomplicated, objective manner. Keep the message coming, keep it simple and help donors to identify their interests (The Non-Profit Times, July 9, 2013). Major gift donors are an elite club of donors who like to feel that they are “in the loop” with the organization and have access to executives and directors. Development staff can help planned gift donors feel “included” in the organization by sending them timely progress updates, newsletters and handwritten notes when appropriate. When a donor makes a major gift through a planned giving program, many development professionals say that our work is just beginning as we strive to nurture those existing relationships and cultivate new ones. It really is about “friend-raising”.